BDCs, ETFs and CEFs: Some Top-Yielding Income Alternatives

By Michael Aneiro

In case you haven’t read them already, two items from this week’s Barron’s magazine are right in the wheelhouse of income investors:

In A Smart Alternative to Junk Bonds, Jack Hough makes the case for business development companies, or BDCs, while offering a solid primer on the asset class. BDCs make loans to small and midsize businesses and pass the interest on to shareholders as income, and trade like stocks, akin to pass-through investments like real-estate investment trusts and master limited partnerships. The article recommends investors look in particular at Hercules Technology Growth Capital (HTGC), Golub Capital BDC (GBDC), New Mountain Finance (NMFC), and Ares Capital(ARCC). This blog has written previously on BDCs, and you can read more about the pitfalls of such investments, particularly regarding their fee structures, here.

In The Closed-End Advantage, Brendan Conway examines the relative merits of fund structure – closed-end funds versus mutual funds versus exchange-traded funds – when investing in bank loans, looking in particular at the PowerShares Senior Loan Portfolio ETF (BKLN), the Nuveen Floating Rate Income Opportunity (JRO) fund, the BlackRock Floating Rate Income Trust (BGT) and the SPDR Blackstone/GSO Senior Loan ETF (SRLN). Bank loans remain one of the hottest income asset-classes this year, but not all loan funds are alike.

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